The National Treasury says it has withheld R13.5bn from 69 municipalities, including R3.6bn from the City of Johannesburg, and will only release a third of the money once municipalities prove they are paying creditors in line with signed repayment agreements.
The move forms part of the Treasury’s intervention to enforce financial discipline after municipalities repeatedly failed to comply with the Municipal Finance Management Act (MFMA), while racking up billions in debt to Eskom, water boards, pension funds, the South African Revenue Service and other creditors.
Municipalities have collectively accumulated R287.46bn in unauthorised, irregular, fruitless and wasteful expenditure (UIFWE) since 2021/22, according to the auditor-general.
Deputy director-general for intergovernmental relations at the National Treasury, Ogalaletseng Gaarekwe, said the withheld funds would be released in stages depending on how quickly municipalities complied with Treasury’s conditions.
“Once they give us signed payment plans, we will release a portion of the money, probably one-third, for them to pay the accounts as agreed with the creditors. Once they have done that and provide us with proof, we will release the remaining money,” she said.
“Essentially it means your money could be withheld for a short period only. It depends on how fast the municipality acts. It could be a week, it could be two weeks, it could be a month.”
We wrote to 99 municipalities and 30 responded in the manner we required, which is why we did not withhold their money. The remaining 69 did not meet the requirements
— Ogalaletseng Gaarekwe, National Treasury DDG for intergovernmental relations
She said the Treasury withheld R13.5bn out of municipalities’ total equitable share allocation of about R110bn for the financial year.
Gaarekwe said the 69 municipalities represent a reduced number after some honoured commitments they had previously made to the Treasury.
She said municipalities were assessed across several categories, including those that:
- adopted unfunded budgets;
- failed to deal with UIFWE; or
- defaulted on payments to creditors.
The municipalities were given advance notice before the funds were withheld, she said.
“The first set of letters went to municipalities on June 22 and 25. At that stage we wrote to 99 municipalities and 30 responded in the manner we required, which is why we did not withhold their money. The remaining 69 did not meet the requirements.”
For municipalities with growing UIFWE, the Treasury demanded plans outlining how they would reduce the expenditure after many failed to honour commitments made earlier this year.
Gaarekwe also revealed national and provincial departments have been warned they too could face withheld funding if they continue failing to settle debts owed to municipalities.
“What we have done is that national departments received letters in February informing them they must pay their accounts or National Treasury will withhold their funds. We did the same with provinces. In April we sent letters to provinces and gave them until May 29 to respond."
Just as we require proof from municipalities that they have payment plans with creditors and pension funds, we are also asking provinces to provide proof they have payment plans with municipalities
— Ogalaletseng Gaarekwe
The Treasury has since analysed the responses and found many outstanding amounts remain under dispute.
“We’re saying on the accounts that are not disputed, give us a reasonable payment plan. We had one province proposing to pay R700m over seven years, which is unreasonable.
“Just as we require proof from municipalities that they have payment plans with creditors and pension funds, we are also asking provinces to provide proof they have payment plans with municipalities.
“The minister has also made it clear that even disputed amounts must be resolved within three months. They cannot remain disputed forever.”
Gaarekwe said the Treasury was also engaging national and provincial departments to ensure they verified municipal accounts before settling them, as some invoices contained errors.
“There needs to be a data cleansing process. In some instances, you find a municipality billing a department that does not have offices in that municipality.
“We are correcting the behaviour in municipalities, and we want that to extend to departments across all three spheres of government.”
Sowetan
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